Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 6, Problem 12SQ
To determine
The impact of decrease in demand when the supply held constant.
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According to the law of diminishing marginal utility:
a. as you consume less of something, your total utility will decrease.
b. as you consume less of something, your marginal utility from consuming that good will increase
c. you should never consume more of something if your marginal utility is decreasing.
d. If your total utility is increasing as you consume more of something, then your marginal utility must be increasing as well.
A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per
bottle.
a. Draw the consumer's budget constraint (put pillow on the horizontal axis). What
is the slope of this budget constraint?
b. Suppose his income increases from $15,000 to $20,000. Illustrate what happens if
both pillows and soda are normal goods.
c.
The price of pillows rises from $35 to $40 per pillow, while the price of sodas is
unchanged. For a consumer with constant income of $15,000, show what happens
to consumption of both goods (assume both goods are normal goods). Decompose
the change into income and substitution effects.
d. Under what circumstance(s) if any can an increase in the price of pillows induce a
consumer to buy more of that good? Explain.
e. Explain how a consumer should allocate expenditure in order to achieve
maximum satisfaction and analyse how a rise in income might affect that
allocation.
Parts d-h please!
Chapter 6 Solutions
Economics For Today
Ch. 6.1 - Prob. 1YTECh. 6.1 - Prob. 2YTECh. 6.2 - Prob. 1YTECh. 6.A - Prob. 1SQPCh. 6.A - Prob. 2SQPCh. 6.A - Prob. 3SQPCh. 6.A - Prob. 1SQCh. 6.A - Prob. 2SQCh. 6.A - Prob. 3SQCh. 6.A - Prob. 4SQ
Ch. 6.A - Prob. 5SQCh. 6.A - Prob. 6SQCh. 6.A - Prob. 7SQCh. 6.A - Prob. 8SQCh. 6.A - Prob. 9SQCh. 6.A - Prob. 10SQCh. 6.A - Prob. 11SQCh. 6.A - Prob. 12SQCh. 6.A - Prob. 13SQCh. 6.A - Prob. 14SQCh. 6.A - Prob. 15SQCh. 6 - Prob. 1SQPCh. 6 - Prob. 2SQPCh. 6 - Prob. 3SQPCh. 6 - Prob. 4SQPCh. 6 - Prob. 5SQPCh. 6 - Prob. 6SQPCh. 6 - Prob. 7SQPCh. 6 - Prob. 8SQPCh. 6 - Prob. 9SQPCh. 6 - Prob. 10SQPCh. 6 - Prob. 1SQCh. 6 - Prob. 2SQCh. 6 - Prob. 3SQCh. 6 - Prob. 4SQCh. 6 - Prob. 5SQCh. 6 - Prob. 6SQCh. 6 - Prob. 7SQCh. 6 - Prob. 8SQCh. 6 - Prob. 9SQCh. 6 - Prob. 10SQCh. 6 - Prob. 11SQCh. 6 - Prob. 12SQCh. 6 - Prob. 13SQCh. 6 - Prob. 14SQCh. 6 - Prob. 15SQCh. 6 - Prob. 16SQCh. 6 - Prob. 17SQCh. 6 - Prob. 18SQCh. 6 - Prob. 19SQCh. 6 - Prob. 20SQCh. 6 - Prob. 21SQCh. 6 - Prob. 22SQCh. 6 - Prob. 23SQCh. 6 - Prob. 24SQCh. 6 - Prob. 25SQ
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- If a rational consumer is in equilibrium, then: a. the marginal utility obtained from one product is equal to the marginal utility obtained from any other product. b. the marginal utility per last dollar spent is the same for all goods consumed. c. total utility becomes zero. d. a reallocation of income would increase the consumer's total utility.arrow_forwardA consumer has income of $3,000. Fresh Juice costs $3 per glass, and cheese costs $6 per pound. (a) Draw the consumer's budget constraint (put cheese on the horizontal axis). What is the slope of this budget constraint? (b) The price of cheese rises from $6 to $10 per pound, while the price of Fresh Juice remains $3 per glass. For a consumer with constant income of $3,000, show what happens to consumption of Fresh Juice and cheese (assuming both are normal goods). Decompose the change into income and substitution effects. Be sure to clearly mark all relevant information in your diagram.arrow_forward6. A consumer has an expenditure function given by E = Ū(P +P). When the consumer has an income of 100, it can reach a maximum utility of 20. The price of x increases by 3 and the consumer's income increases by 25. Are they better off or worse off than before the changes? Explain how you know.arrow_forward
- If the average utility of good A is 15 and the average utility of good B is 25, you should: A. keep consuming the current amounts of both good A and good B. B. consume more of good B and less of good A. C. consume more of good A and less of good B. D. realize that you don't have enough information to answer the question.arrow_forward1. A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5. a. Draw the budget line. b. What happens to the original budget line if the budget falls by 25%? c. What happens to the original budget line if the price of X doubles? d. What happens to the original budget line if the price of Y falls to $4?arrow_forwardQ. Bridget has a limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget's utility, while the last pound of cheese added 40 units. a. Is Bridget making the utility-maximizing choice? Why or Why not? b. If not, what should she do instead? Why? Please provide the correct answer. Thank you!arrow_forward
- Question 4 A consumer has income of $15,000. Pillows costs $35 per pillow, and soda costs $70 per bottle. Draw the consumer’s budget constraint (put pillow on the horizontal axis). What is the slope of this budget constraint? Suppose his income increases from $15,000 to $20,000. Illustrate what happens if both pillows and soda are normal goods. The price of pillows rises from $35 to $40 per pillow, while the price of sodas is unchanged. For a consumer with constant income of $15,000, show what happens to consumption of both goods (assume both goods are normal goods). Decompose the change into income and substitution effects. Under what circumstance(s) if any can an increase in the price of pillows induce a consumer to buy more of that good? Explain. Explain how a consumer should allocate expenditure in order to achieve maximum satisfaction and analyse how a rise in income might affect that allocation.arrow_forwardHow does the law of diminishing marginal utility relate to changing income? Select one: a. The marginal benefit of an extra dollar of income rises as income rises. b. The marginal benefit of an extra dollar of income falls as income rises. c. The total utility gained from a small income is higher than the total utility gained from a high income. d. The total utility gained from a high income is higher than the total utility gained from a low income.arrow_forwardWhich statement BEST describes the principle of diminishing marginal utility? As an individual consumes more of a good: Select one: a. the marginal utility will eventually become negative. b. the total utility obtained will eventually become negative. c. the addition to total utility obtained from the nth unit of the good will be less than that obtained from the immediately preceding unit of the good. d. the total utility obtained will eventually fall.arrow_forward
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